Overview
FAR 32.706 prescribes specific contract clauses that manage the relationship between contract obligations and the availability of government funds. These clauses ensure compliance with fiscal law by defining the government's liability when funds are not yet available or when costs reach established limits.
Key Rules
- Availability of Funds (52.232-18): Must be used when a contract action is initiated before the start of a new fiscal year but is chargeable to that upcoming year's funds.
- Next Fiscal Year Funding (52.232-19): Required for one-year service contracts (indefinite-quantity or requirements) funded by annual appropriations that extend beyond the initial fiscal year.
- Limitation of Cost (52.232-20): Mandatory for all fully funded cost-reimbursement contracts, regardless of whether a fee is included.
- Limitation of Funds (52.232-22): Mandatory for all incrementally funded cost-reimbursement contracts to manage financial risk across funding increments.
- Unauthorized Obligations (52.232-39): A universal requirement that must be inserted into all solicitations and contracts to nullify any "click-wrap" or "browse-wrap" terms that would create an unauthorized indemnification by the government.
Practical Implications
- Risk Mitigation: These clauses protect the government from Anti-Deficiency Act violations and protect contractors by signaling when they are not authorized to continue work due to a lack of funding.
- Monitoring Requirements: Contractors under cost-reimbursement contracts must strictly monitor their "burn rate" and provide formal notification to the Contracting Officer when they approach the funding limits specified in these clauses.